Frequently Asked Questions on Food Aid Reform

Q: The 2014 Farm Bill just made a lot of changes to Food for Peace programs – USAID even called it the most significant change in a couple decades – why is USAID pursuing additional reform in FY 2015?

USAID is appreciative of the reforms to date in both the 2014 Farm Bill and the FY 2014 Omnibus Appropriations Bill, which represent the most significant reforms to improve the flexibility and effectiveness of the Food for Peace program in its six-decade history. The flexibility provided in the Farm Bill and the FY 2014 Omnibus will allow USAID to nearly eliminate monetization – the sale of commodities overseas to fund activities - and reform development programs, while also providing modest flexibility within emergency programs.

While significant progress was made in reforming our development programs, we believe there is more work to do in reforming our emergency programs. USAID aims to build on the modest flexibility provided for our emergency programs in the Farm Bill through our FY 2015 proposal to allow us to respond to growing emergency needs and to use the best possible tool for every situation. The FY 2014 food aid reform proposal aimed to reach an additional two to four million people. USAID estimates that key reforms in the Farm Bill and the Omnibus Appropriations Act will allow us to reach an additional 800,000 people. While this is a significant step forward, the 25 percent flexibility in the FY 2015 proposal will allow us to reach up to two million additional people.

Q. Why has the Administration shifted its reform agenda to no longer pursue a 302(b) transfer to State, Foreign Operations?

The 2014 Farm Bill made significant steps forward towards increasing our flexibility in Title II programs. Congress did not support a 302(b) transfer last year and we were encouraged by the flexibility provided in the Farm Bill and Omnibus Appropriations Bill. By requesting additional reforms to the Title II funding, we are able to maximize those gains to have the greatest impact.

Q. The FY 2014 Omnibus included a significant bump-up in IDA resources. Can’t USAID use those resources to respond flexibly to crises overseas?

We are appreciative of the increase in IDA resources that we received in FY 2014. This funding enables us to respond in places like Syria where humanitarian needs continue to grow with over 9.3 million people currently in need of humanitarian assistance, including 6.5 million in need of food assistance. Due to security and access constraints, U.S. purchased commodities cannot be widely used to respond to this crisis. Therefore, greater flexibility under Title II would allow us to better reach Syrians using cash transfers, LRP and food vouchers.

However, the additional IDA resources are not part of our base appropriations and we can not rely on them to meet additional needs in FY 2015. With humanitarian crises growing in countries such as South Sudan and Central African Republic – where 4.3 million people are currently in need of food assistance – the FY 2015 request allows us to meet the needs of two million more people without an increase in resources.

Q. Is it more expensive to purchase and deliver food sourced locally and regionally than food from the United States?

On average purchasing food locally and regionally is less expensive than purchasing U.S. food. Here’s how we’ve calculated the numbers: Looking first at average cost per metric ton (MT), in FY 2012, local and regional purchases alone averaged $929/MT. This calculation starts with an Emergency Food Security Program total expenditure of $374.5 million. Of that $374.5 million, 44 percent, or $164.8 million, was used for local and regional purchase of commodities. Divided by the total number of commodities purchased locally and regionally (177,346 MT), this results in an average of $929/MT.

Comparatively, Title II purchases (U.S. purchased and shipped) averaged $1,188/MT. This figure was calculated by dividing the total value of Title II emergency food aid ($1.17 billion) by the total metric tonnage (985,780 MT) for an average $1,188/MT. This is $259, or 20 percent, more per metric ton for Title II than for LRP. For the period from 2010 to 2012, LRP averaged nearly 30 percent less than Title II costs per ton.

A GAO study, a Cornell study, and others have found that the cost of procuring grains and legumes through LRP versus Title II in-kind food purchases is 30-50 percent less expensive.

Q: Are we handing out physical cash to beneficiaries? How are we preventing waste, fraud and abuse in our programs?

Yes, in select cases USAID will distribute cash to beneficiaries to allow them to purchase food on local markets. USAID deems this to be the correct response in certain instances where people are physically spread out or highly mobile, rapid response is a high priority, or food needs are so severe people will spend most new income on food.

From requirements built into USAID’s application process to post-distribution monitoring, a variety of mechanisms are in place to ensure USAID and its partners safeguard against theft, fraud and other abuses.

In USAID’s annual program statement for emergency food assistance, the Agency requires that partners share their risk mitigation plan in their proposals to ensure against abuses in their programs. USAID staff regularly monitor these programs and routinely follow up to ensure these steps are put into place during program implementation.

Operationally USAID partners also take a variety of steps to safeguard the programs. For example, in voucher programs:

The vouchers often have holograms, water marks, or serial numbers to prevent fraud.

Vouchers often have limited redemption periods, to ensure beneficiaries use the vouchers in a timely manner to prevent loss or damage to the voucher.

Partners also monitor markets during redemption periods, to ensure they are used properly by both beneficiaries and vendors.

Partners routinely require receipts for voucher processing when the vendors bring the vouchers to the partner to exchange for cash.

For cash transfer and voucher programs, partners require beneficiaries to present a government identification card, and in some instances use biometrics (e.g. fingerprints) to verify beneficiaries’ identities and to confirm they are supposed to receive assistance.

Following a voucher or cash distribution, USAID and its partners do post-distribution monitoring with beneficiaries and vendors to determine how vouchers and cash were used. Hotlines and other mechanisms for feedback are often established, for beneficiaries to lodge complaints if there are problems with the program.

Q: If we are buying food in developing countries, how can we guarantee we aren’t inadvertently purchasing food imported from U.S. competitors like Russia? What controls are in place to make sure we know where the food comes from?

As is currently the case for USAID funded local and regional procurements, USAID partners will continue to be required to buy from developing countries near crises and to provide detailed information on planned procurement locations, quantities and other details when applying for assistance. These details are incorporated into the actual agreement. Deviations from the agreed-upon terms would require USAID approval. By requiring this information, USAID ensures we are not inadvertently purchasing food from U.S. competitors such as Russia. Our experience has been that the majority of LRP purchases are in countries neighboring a crisis or within the same country being served.

Q: How will USAID ensure that local or regional procurement, cash transfer or food voucher programs will not negatively impact local markets?

USAID makes every effort to ensure food assistance programs do not negatively impact local markets. Under Title II programs, a "Bellmon determination" is required to ensure monetized commodities for development food assistance programs do not adversely impact markets.

Similarly, in their proposals to USAID for IDA-funded emergency food assistance, USAID partners are required to submit a market analysis in order for their proposal to be considered. The market impact analysis addresses what impact the proposed intervention is likely to have on the commodity market system in the proposed program location. This market analysis informs the partner’s chosen method of intervention. Proposals that do not include this market analysis will not be considered.

Q: Will branding foreign-sourced commodities as “From the American People” risk the reputation for safety and quality that American-produced commodities have earned?

USAID food assistance will continue to be branded and marked, with the USAID logo prominently displayed on all program-related materials, whether purchased in the United States. or in the affected region.

USAID and its partners purchase products overseas that are already available in local markets for local consumption. Food safety standards are rigorously followed: USAID’s partners must comply with recipient country food safety standards; cereals must be tested for aflatoxin; and awardees are required to use established inspection services prior to shipment and distribution. USAID has purchased commodities locally and regionally for over three years. In that time there have been no reports of unsafe, low-quality food being distributed to beneficiaries.

Q: What’s your source for claiming that food purchased locally or regionally will arrive faster than food purchased in the United States? If shipping food from the U.S. takes time -- and getting food to hungry people quickly is the goal -- why not preposition food near where it will be needed? What about the increase in preposition funding you received?

Research from a variety of institutions – both public and private – tells us that locally and regionally procured food arrives faster than food from the United States

An independent, third party evaluation of USDA’s five-year pilot of LRP in developing countries found that on average, LRP arrived 74 days faster than traditional in-kind assistance from the U.S.

A January 2012 Cornell research paper found an average time savings of 14 weeks for LRP compared to traditional in-kind assistance from the U.S.

A 2008 GAO report found delivery of in-kind food aid took an average of 147 days compared to 35 days for LRP and 41 days for regional procurement in Sub-Saharan Africa.

Prepositioning has been incredibly useful in improving our response time to crises and is a tool we’ll continue to use. However, maintaining secure, safe warehouses for food around the world is very expensive, so USAID limits its number of prepositioning warehouses to key locations closest to regions where there are recurrent crises.

Prepositioning does not eliminate shipping expenses to the various prepositioning sites -- or the additional costs that are incurred when prepositioned food has to be moved again to the crisis location.

We also don’t want to unnecessarily subject larger volumes of commodities to the risk of spoilage or damage during warehousing. As certain commodities age faster than others, USAID is limited in the types of commodities that it can effectively store.

Critically, prepositioning also does not change the fact that in some cases, like Syria, due to security concerns or other constraints, U.S. commodities are just not the most appropriate tool. There are other interventions that we and other international donors can now use to refine and improve our response.

Q. When purchasing food locally, what controls are in place to make sure we know where the food comes from? Is there a tracking system to ensure that local purchases are actually locally and regionally grown?

As is the current practice for USAID-funded local and regional procurements, USAID partners will continue to be required to buy from developing countries near crises and to provide detailed information on planned procurement locations, quantities and other details when applying for assistance. These requirements are included in the actual agreement. Deviations from the agreed-upon terms require USAID approval. By requiring this information, USAID ensures that we are not inadvertently purchasing food from U.S. competitors.

In most cases, we have information on both the source (where it was purchased) and origin (where it came from). In addition, USAID’s largest partner, the United Nations World Food Program (WFP), has requirements for origin certification for local and regional procurement.

In each country where USAID has done local and regional purchase of food, we have found that imports of the types of commodities we would purchase, such as sorghum, corn and beans, is fairly low.

Q: Has the Department of Defense assessed how food aid reform would impact merchant marine readiness and our national security?

Yes. Under-Secretary of Defense Frank Kendall released a letter on June 18, 2013, which re-stated DoD’s support for the food aid reform proposal and its assessment that the proposal “will not impact U.S. maritime readiness and national security.”

George Mason University is also in the process of conducting an assessment of the impact of Food Aid Reform on the maritime industry. This assessment will use information from the Fiscal Year 15 budget proposal along with the FY 2014 Farm Bill.

Q: Will the food aid reform proposal have any impact on “militarily useful vessels”?

No. In his June 18 letter, Under Secretary Kendall stated that DoD is working closely with the Maritime Administration to support the U.S.-flag fleet and facilitate the retention of militarily useful ships. Under Secretary Kendall also stated that DoD’s analysis has confirmed that no militarily useful vessels will be affected by the food aid reform proposal.

The assessment by George Mason University will give more detailed, up to date information on the impact of the FY 2015 Food Aid Reform on the maritime industry.

Q: What about the impact on “non-militarily useful vessels”? I’ve heard that thousands of mariners on those ships could lose their jobs? Has the Department of Defense looked at the impact on mariners on vessels that carry food aid cargo, but are not useful to the U.S. military?

Yes. DoD has assessed the possible impact of food aid on mariners on non-militarily vessels. DoD’s analysis indicated that the FY 2014 reform proposal “may affect 8-11 vessels – all non-militarily useful – and roughly 360 to 495 mariners.” The pro-rata impact of the FY 2015 proposal based on last year’s Department of Defense estimates may affect an estimated 4-6 non-militarily-useful vessels and 200-275 mariners

The assessment by George Mason University will give more detailed, up to date information on the impact of the FY 2015 Food Aid Reform on the maritime industry.

Q: Does that mean those mariners are going to lose their jobs?

TThose jobs can be retained if affected vessels sell their excess capacity to other U.S. exporters. Other U.S.-flag preference opportunities exist, including USDA impelled food aid (50 percent compliance), Export Import Bank (100 percent), civilian agencies (50 percent) and coastwise trade (i.e., Jones Act, 100 percent). Ships participating in the food aid program are often also active in the growing coastwise trade, which according to the Maritime Administration represents more than 1 billion metric tons of cargo annually. In contrast, USAID transported just 1.5 million metric tons in FY 2012.